California lawmakers tussled over payments for spinal implants

Each year, thousands of Californians hurt themselves on the job and end up with back surgery -- a small but expensive piece of the state's workers' compensation system.

The vast majority of California workers with injured backbones wind up with spinal implants -- some 71 percent of them in 2010, research shows.

Political controversy has brewed in the Capitol for more than a decade over the procedure:

Are implants the best treatment for all those injured construction workers, factory workers and farm workers?

Or did California create an unjust incentive when it agreed 10 years ago to pay hospitals extra for putting medical hardware in workers' spines?

The questions have taken on new interest following federal authorities' raid on a Southern California hospital that specializes in spinal surgery for workers' comp patients.

Pacific Hospital of Long Beach was searched by the FBI in April. The hospital has had ties to former Assemblyman Tom Calderon, whom the FBI sought to contact last week.

California lawmakers have been wrestling for more than 10 years with the question of how much money medical businesses can make for performing spinal implant surgery on workers' comp patients.

Most of the workers' compensation claims for spine disorders come from those who toil in construction, manufacturing, mercantile and clerical services, according to research by the California Workers' Compensation Institute.

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People who work at farms, restaurants and hospitals also make up a big portion of workers' comp spine patients.

John Wilson, 53, said he was working for a boat dealership in San Bernardino, Wilson said he hurt his back as he was moving a boat off the back of a truck.

"That incident right then put me to the ground," he said. "I could barely get up."

Doctors told Wilson he would need surgery, he said, and implanted titanium hardware in his back in 2004.

Today, Wilson's back still hurts; sometimes his leg goes numb. Still, he's back at work driving a truck.

Just the year before his surgery, lawmakers in Sacramento had passed a bill that made sweeping reforms to the state's workers' compensation system.

Tucked into the 56-page law carried by then-Sen. Richard Alarcon, was a paragraph allowing hospitals performing spinal surgery on workers' comp patients to bill insurance plans an additional fee for "implantable medical devices, hardware, and instrumentation."

Hospitals had argued that the reimbursement for performing surgery wasn't enough to cover the cost of buying spinal implants necessary to repair some back injuries.

"We had a number of hospitals cancel surgeries because they were losing money on them," said Jan Emerson-Shea, a vice president for the California Hospital Association.

Hospitals lobbied lawmakers to allow them to bill insurance plans the extra amount for implanting hardware in the spines of injured workers. Over the next two years, legislative analyses say, the incidence of spinal surgery involving implants went up.

The same year the Alarcon bill passed, Tom Calderon was working for a group of surgery centers that specialize in treating workers' compensation patients. As an assemblyman from 1998-2002, he had carried legislation that would have allowed them to charge unlimited fees. When he left the legislature, the surgery centers hired him as a government relations consultant.

Over the next few years, a series of reports to state government criticized the new payment, saying it was too generous to hospitals and too costly to the workers' compensation system, which is paid for by employers.

Research by the California Workers' Compensation Institute argued that hospitals were being overpaid for spinal hardware -- to the tune of $67.5 million in 2010.

Pacific Hospital of Long Beach was the subject of a Wall Street Journal investigation last year that raised questions about how much it was billing California's workers' compensation system for performing spinal surgeries with implants.

The newspaper said the hospital was one of the most prolific spine-fusion facilities in California, between 2001 and 2010 billing $533 million -- three times as much as any other hospital.

The hospital has declined several interview requests from The Bee and will not answer questions about its relationship with Tom Calderon, who said in campaign material that he sits on its board of directors. Calderon also listed the hospital as a client of his consulting business last year on a disclosure statement filed with the state.

In a brief statement, the hospital said it "has no direct knowledge of the recent scrutiny of [state Sen.] Ron Calderon and his immediate family members."